Apollo Group cuts profit forecast, sign-ups slip again

(Reuters) - Apollo Group Inc APOL.O, which owns the biggest U.S. for-profit college, reported lower student sign-ups for the third straight quarter and cut its operating profit forecast for 2013.

Apollo, which runs the University of Phoenix, now expects operating income of between $500 million and $550 million for the year ending August 2013, down from its prior forecast of $525 million to $575 million.

“They are going to see more cost savings than they had expected, but yet now they’re expecting lower profit, so something strange is going on there,” William Blair & Co analyst Brandon Dobell said.

Apollo said in October that it would cut 800 jobs and shut down 25 campuses to save costs, as fewer students signed up at its colleges.

“During the first quarter, we achieved much of our anticipated 2012 fixed cost savings -- earlier than expected,” Chief Financial Officer Brian Swartz said on a post-earnings conference call on Tuesday.

General costs fell 8 percent in the first quarter.

“We now expect to realize at least two-thirds of the annual cost savings in fiscal 2013,” Swartz added.

For-profit education providers have been plagued by falling enrollments over the last two years in the face of tighter regulations and low job-placement rates.

U.S. colleges were forced to focus more on the quality of education after the government introduced new rules that threatened to cut financial aid if debt loads remained high.

The company’s University of Phoenix has also ramped up its spend on marketing and frozen tuition fees to tempt students to sign up.

New student enrollments fell 15 percent to 54,100 in the first quarter ended November.

CFO Swartz also said new student enrollments in December did not meet Apollo’s expectations.

The company had said last year that it expected new enrollments to grow again in the second half of 2013.

Net income attributable to Apollo fell to $133.5 million from $149.3 million a year earlier.

However, the company’s attributable net income per share rose to $1.18 from $1.14 as Apollo bought back some of its shares.

Excluding items, the company earned $1.22 per share.

Revenue fell 10 percent to $1.06 billion.

The company’s shares were down about 6 percent after the bell. They closed down 3 percent at $20.94 on Tuesday on the Nasdaq. The stock has dropped more than 60 percent over the past year.

Reporting by Sagarika Jaisinghani in Bangalore; Editing by Roshni Menon